It is certainly true that Washington is a gigantic pool of money surrounded by people who want some of it. And, perhaps, some of them are accurately described as "overpaid bureaucrats and blood-sucking lawyers." However, most of them work for companies that supply goods and services to the government. I was at a Raytheon plant in Forest, MS last week where they build radar assemblies for F-16 fighter jets. The people that work there are not parasites -- they're the salt of the earth. So are the farmers who grow the food the government donates to poor countries where people are starving. So are the employees of companies that make kevlar vests that save federal law enforcement officers' lives. Republicans are fond of repeating the talking point: "the government never created a job," even though it's preposterously wrong. The federal government is the largest private-sector job creator in the United States.

What is the evidence that cities are more efficient ways of organising economic activity? Specifically, how do we know that - in this day-and-age of telecommunications - the existence of cities arises from superior efficiency in organising economic activity, and not merely from superior efficiency in organising rent-seeking?

Ryan’s argument in favour of cities – following from Ed Glaeser - boils down to the following:

a) there is clear evidence that agglomeration efficiencies exist;

b) cities are agglomerations;

c) therefore cities exist at their current sizes because of agglomeration efficiencies.

Inefficient cities may persist, and purely competitive firms within those cities may export if:

a) the city as a unit has some rent-seeking power which requires successful firms to remain in the city in order to access those rents; and

b) the purely competitive firms experience "pecuniary diseconomies" which drive up their costs, and consequently the prices they charge to the outside world.

The appropriate analogy is of a franchisor who owns some rent-generating right (for example a patent) and licences that right to franchisees. The franchisees might be in pure competition with one another and might continue to “export” to the outside world, but none can leave the franchise system because they would lose access to the source of the rents. They experience pecuniary diseconomies in the form of their licence fees, and this is passed on to their customers.

In the case of cities, the franchisor is the city. The source of rents is a combination of incumbency and political rents. (Rents in this case are defined in abstract terms as sustained benefits arising from a meta-stable distribution of rights.) The franchisees are firms operating within the city. In the case of political rents, they must stick close to their politician mates to ensure that regulatory regimes and the tax system and government contracts and other government action operates in their favour. The pecuniary diseconomy comes in the form of higher wages paid to the members of the rent-seeking metropolis.

Compared with other regimes, the United States – with its constitutionally separated legislature and executive - actually makes rent-seeking rather difficult.

The mechanism by which political rent-seeking affects economic geography can be seen more clearly in countries and states operating under elective dictatorship, with an all-powerful Cabinet and an impotent legislature. Here prospective rent-seekers must live within “lunching distance” of the Cabinet. They must be able to meet Cabinet ministers face-to-face, or have children or grandchildren who attend the same schools or play on the same sports teams. Or they must know someone – or work for someone - who can do this. Or know someone who knows someone who can do this.

Power and influence - and consequently wealth - radiate out from the Cabinet like the layers of an onion . . . and the population correspondingly moves in as close to the centre as it can to share in the largesse.

Questions which the agglomeration efficiency school might like to consider are:

1. Why do robust federations appear to have a more distributed population than unitary states? Why does the United Kingdom not have a post-industrial city rivalling London (as Melbourne rivals Sydney). Why do cities like Cheyenne or Las Vegas exist at all?

2. Why do countries and states with a strong Executive (as in the Westminster system) appear to have more concentrated populations than those with stronger Legislatures (as in the US)? Why does (from memory) 65% of the population of Australia live in the eight principal cities, and (from memory) 45% of the population of Canada live in either the federal capital or the capital or principal city of each province or territory? This is especially odd when industries which enjoy a comparative advantage lie in the regions.

3. Why is it that in those countries and states with a strong Executive, the population tends to live in the actual or de facto centre of Executive government (as in Australia)? Is this just a coincidence of cosmic proportions?

4. Why else do countries with corrupt governments see a drift of population to hellish metropolises, even when the industries which enjoy a comparative advantage lie in the regions?

trustbutverify
Oct 28th 2011 7:42 GMT
"Take away the government and you'd have just another Baltimore or Philadelphia."

No you wouldn't -- you would have even LESS. DC exists solely as the seat of government. Prior to the Constitution and compromise that created DC, there was nothing there. The only two local communities were the small ports of Georgetown and Alexandria, on opposite sides of the river from each other. Neither was considered a major port in their heyday, and the region had no industry to speak of other than local agriculture.

Absent the government, DC would not have even come into being as a city if left to purely natural forces, or it would have perhaps become a small town like some of the other fishing towns on the Chesapeake (think Annapolis maybe).

@Doug Pascovar Uh, that was supposed to be "one of them." I'm dumb as a stump, which is why I live in LA instead.

No, Doug. You live in LA because you are the artistic type. Mere money isn't important to you. You want to live surrounded by people who create things (like movies), not people who grub for money. Right?

I recall a Final Jeopardy "answer": what city is surrounded by the 3 highest-income per-capita counties in the United States ? I got it wrong at the time; you already know the answer (if you assumed my comment here was relevant).

Carahsoft Technology - Carahsoft Technology delivers a wide variety of software, hardware, and IT support services to government agencies at the local, state, and federal levels.

DLT Solutions - Provides software and technology services to federal, state, and municipal government agencies. Its expertise includes enterprise applications and platforms, data management, infrastructure and peripherals, and government geospatial data systems.

Vangent - Provides information management and business process outsourcing services to public health care and other civilian government agencies, defense and intelligence agencies, and foreign government organizations.

Covington & Burling - A global law firm with offices in Beijing, Brussels, London, New York, San Diego, San Francisco, Silicon Valley, and Washington.

immixGroup - immixGroup helps technology manufacturers market their products to the government through representation, channel programs, contract management, and IT consulting.

Here are the top ten fastest growing companies in the Washington Metro Area according to Inc Magazine:

Integrity Management Consulting - Offers acquisition management, capital planning and investment control, performance management, and program management to clients such as Medicare and Medicaid, and the departments of Transportation and Homeland Security.

JMA Solutions - Provides air traffic control and engineering support to the FAA to help make the airways secure, efficient, and convenient for the ever-increasing traveling public. It authors the National Aviation Research Program document that is provided annually to Congress, and provides engineering support to the Unmanned Aerial Vehicle System at the Kennedy Space Center.

AppAssure Software - Makes backup and disaster recovery software that is designed not only to recover data, but also to protect the clients' entire application infrastructures and ensure rapid recovery in the event of system failures.

MicroTech - Technology systems integrator MicroTech specializes in government computing environments and manages more than half a million technology users daily. Holding more than 100 prime contracts and more than 25 contract vehicles, MicroTech offers access to 2500 vendors and over a million technology products.

Provideo Management - Supports federal agencies and the military with strategy and execution of major acquisitions of property and equipment as well as with budgeting, IT, and business operation services such as HR and records management.

Soft Tech - Provides IT services such as IT Operations and Maintenance, Custom Software Development, IT Systems Engineering, System architecture and design, Web-enabled applications, COTS hardware and software integration.

The Trademark Company - Offers trademark and brand protection services, from the development of names, logos, and brand presence to trademark research, registration, and enforcement.

Evoke Research and Consulting - Specializes in program management services for government customers. Its offerings include project management, budgeting, contract and acquisition support, portfolio management, and Lean Six Sigma, a business management strategy.

MindPetal - Specializes in large service-oriented architecture (SOA) business process management implementations, mobile services, and rich Internet applications. Customers include the Peace Corps, Department of Labor, and the National Cancer Institute.

How much of the reduction of government employment and growth in private employment is a result of more-or-less dirct transfer by using contractors instead of government employees, as has been the trend?

Also worth looking at the relative cost for product of that work as well as method of payment. Payment in long-run pensions, job security and medical are less likely to be fungible to housing spending than hgih pay/lower benefit/lower stability contractor jobs of which I'd expect a higher portion to go to spending on, for instance, housing, and would be more likely to show as economic growth because of moving value from "unmeasured" to "measured" economic value.

I'm not having trouble believing that smart people go to the capitol to work in, or on, government and attract other smart people who start businesses that attract more smart people. It's on of them comparative advantage thingabobs, isn't it?

I, too, live in the DC metropolitan area, and I can say without a doubt that there is absolutely no way any other city in the U.S. can replicate the DC economy.

The DC economy is a unique artifice -- yes, it has lots of educated people, etc. etc. However, it is a city that is centered around 1 artificial industry -- government.

Just like Detroit used to be flush with wealth when its 1 industry -- automaking -- was still king, DC is flush with wealth because of its 1 industry, and the fact that this 1 industry generates enough wealth to also support a host of smaller industries around it. Other cities like Detroit, however, can experience busts in their industry, which leads to busts in other businesses regionwide.

DC will never experience that. It's 1 industry will never go away, and very likely will never grow smaller. It is a permanent growth industry that demands highly skilled, highly educated workers, who then have more disposable income to support all of the peripheral industries and businesses as well as the local housing market.

The Leviathan generates its own unique economic sphere, and no one else can replicate it.